What is trailing stop loss and how to use it?

Trailing stop loss will automatically change when the market changes a certain amount in a direction that is beneficial to you to lock in profits. When specifying this type of stop loss, you need to enter a stop loss value and a step value. The latter is the number of points that the market must change in your favor before triggering the corresponding stop loss.

For example, if you set a stop loss of 6 points from the current position with a step length of 10 points, then every time the market changes 10 points in a direction that is beneficial to you, your stop loss will automatically change accordingly, keeping the distance 6 pips level for the new position.

How to trigger a trailing stop loss when adding a trailing stop loss to a transaction order?

  1. Click the down arrow in the ‘Stop Loss’ column
  2. Select ‘Mobile’
    [Please note: Trailing stop loss does not apply to order instructions]
  3. Enter the stop loss and moving step in the box
    How to trigger a trailing stop loss when adding a trailing stop loss to a transaction order?

Trailing stop example
Suppose you add a trailing stop loss to a long position in the German 30 Index, and the German 30 Index is currently trading at 10450.

Your stop loss level is 10435, and your stop loss distance and moving step are set to 15 and 5 respectively. If the market moves in your favor and reaches 10455 (10435 + 15 + 5 = 10455), your trailing stop loss order will take effect, and the new stop loss level will be at 10440, maintaining a stop loss distance of 15 points . Every time the market moves 5 points in your favor, the trailing stop loss will change to a stop loss level that can maintain a stop loss distance of 15 points.

When the German 30 Index hits a high of 10493 and then withdraws by 70 points, the stop loss after the move will be adjusted to 10475, and your position will be profitable at this position.

If the market changes in a direction that is not conducive to you, then the position will stop at 10435 and exit.

Trailing stop double-edged sword

  1. Keep the profit
    The stop loss will change according to the number of points set by the trailing stop loss. When the trading direction is consistent with the market direction, the stop loss will follow the upward/downward movement accordingly.

Example: Open a multiple buy position of EUR/USD at the price of 1.2155, set a stop loss price of 1.2145, and set the trailing stop loss to 30 points. When EUR/USD rises to 1.2185, the stop loss price will automatically rise to 1.2175 (1.2145+30 points). Trailing stop loss will lock 30 points of profit.

  1. Obstruct the take profit

Although trailing stop loss can lock in profit, it will also hinder profit to a certain extent.

Open a multi-buy position for EUR/USD at the price of 1.2155, set a stop loss price of 1.2145, set a trailing stop loss at 30 points, set a take profit at 1.2195 (1.2155+40), and take a profit at 40 points.

When the EUR/USD rises to 1.2185, the trailing stop loss will move to 1.2175 (1.2145+30 points). If the market price pulls back or consolidates at this time, and retraces to 1.2170, the trailing stop loss will start and the profit will be 20 points ( 1.2175-1.2155); But the market is just a finishing process, after which the price rises all the way to 1.2200, exceeding the original set profit level

At this time, the order has been closed out and it was originally profitable by 40 points, but now it is only profitable by 20 points.

In the setting of the moving stop loss point, we must be considerate to prevent price corrections, stop loss exits or hinder the start of take profit.

Please remember: Trailing stop loss is not a guarantee and slippage may occur. This means that the execution price of the trailing stop loss may not be executed exactly at the level you specify.